National Aluminium Company Ltd:Annual Report 2023-24 Analysis

National Aluminium Company Ltd. (NALCO): A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: NALCO was established on January 7, 1981, as a Public Sector Enterprise under the Ministry of Mines, Government of India. It was incorporated to exploit the rich bauxite reserves of Odisha and establish a fully integrated aluminum production complex.

Headquarters Location and Global Presence: NALCO’s corporate headquarters is located in Bhubaneswar, Odisha, India. While its primary operations are based in India, NALCO exports its products to various countries across the globe, including those in Asia, Europe, and the Americas.

Company Vision and Mission:

• Vision: To be a premier and integrated aluminum producer in the world, excelling in quality, cost, safety, and sustainability.
• Mission: To build a sustainable and profitable business that contributes to the economic growth of India, while adhering to the highest standards of environmental and social responsibility.

Key Milestones in Their Growth Journey:

• 1987: Commissioning of the Alumina Refinery.
• 1987: Commissioning of the Aluminum Smelter and Captive Power Plant.
• 1999: Achieved “Navratna” status, recognizing its excellence in performance.
• 2010: Achieved “Maharatna” status, further signifying its importance to the Indian economy.
• Ongoing: Continuous expansion and modernization projects to enhance production capacity and efficiency.

Stock Exchange Listing Details and Market Capitalization: NALCO is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

• BSE Code: 532234
• NSE Code: NATIONALUM
• Market capitalization is subject to constant change.

Recent Financial Performance Highlights:

• Financial data may be presented in annual reports and investor presentations.

Management Team and Leadership Structure:

• Chairman and Managing Director (CMD): Sridhar Patra

Notable Awards or Recognitions:

• NALCO has received various awards and accolades for its performance in areas such as energy conservation, safety, environmental protection, and corporate social responsibility.

Their Products #

Complete Product Portfolio with Categories:

• Alumina: Calcined Alumina
• Aluminium: Aluminium Ingots, Aluminium Wire Rods, Aluminium Billets, Aluminium Coils, Aluminium Chequered Sheets

Flagship or Signature Product Lines:

• Aluminium Ingots

Manufacturing Facilities and Production Capacity:

• Bauxite Mines: Located in Panchpatmali, Odisha.
• Alumina Refinery: Located in Damanjodi, Odisha.
• Aluminium Smelter: Located in Angul, Odisha.
• Captive Power Plant: Located in Angul, Odisha.

Quality Certifications and Standards:

• NALCO’s products and operations adhere to various international quality standards such as ISO 9001, ISO 14001, and OHSAS 18001.

Unique Selling Propositions or Technological Advantages:

• Integrated operations from bauxite mining to aluminum production.
• Cost-competitive production due to in-house alumina production and captive power plant.
• High-quality products meeting international standards.

Primary Customers #

Target Industries and Sectors:

• Electrical: Cables, conductors
• Transportation: Automotive, aerospace
• Construction: Building materials, architectural applications
• Packaging: Foil, containers
• Consumer Durables: Appliances, utensils

Geographic Markets (Domestic vs. International): NALCO caters to both the domestic Indian market and international markets.

Distribution Network and Sales Channels:

• Direct sales to large industrial customers.
• Network of dealers and distributors across India and in international markets.
• Participation in tenders and auctions.

Major Competitors #

Direct Competitors in India and Globally:

• Indian: Hindalco Industries, Vedanta Aluminium
• Global: Rio Tinto, Alcoa Corporation, Rusal

Competitive Advantages and Disadvantages:

• Advantages: Integrated operations, low-cost production due to captive resources, strong brand reputation in India.
• Disadvantages: Susceptibility to fluctuations in global aluminum prices, dependence on coal for power generation (environmental concerns).

How they differentiate from competitors:

• Focus on cost-efficiency through integrated operations and captive power.
• Emphasis on sustainable practices and environmental responsibility.
• Strong government backing as a Public Sector Enterprise.

Future Outlook #

Expansion Plans or Growth Strategy:

• NALCO has announced plans for capacity expansion in both alumina refining and aluminum smelting.
• Diversification into new areas such as coal mining and renewable energy.
• Modernization and technological upgradation of existing facilities.

Sustainability Initiatives or ESG Commitments:

• Focus on reducing carbon footprint through energy efficiency and renewable energy sources.
• Water conservation initiatives.
• Community development programs in the areas of its operations.

Industry Trends Affecting Their Business:

• Growing demand for aluminum in various sectors.
• Increasing focus on sustainable and low-carbon aluminum production.
• Geopolitical factors and trade policies affecting global aluminum prices.

Financial Performance and Strategic Initiatives Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Decreased from ₹14,256.85 crore in FY 2022-23 to ₹13,149.15 crore in FY 2023-24 (8% decrease), compared to ₹14,058.98 crore in FY 2021-22.
• Total Income: Decreased from ₹14,490.49 crore in FY 2022-23 to ₹13,399.86 crore in FY 2023-24.
• Profit Before Tax (PBT): Increased from ₹1,954.99 crore in FY 2022-23 to ₹2,783.57 crore in FY 2023-24.
• Profit After Tax (PAT): Increased from ₹1,544.49 crore in FY 2022-23 to ₹2,059.95 crore in FY 2023-24, compared to ₹2,951.97 crore in 2021-22.
• Operating Profit Margin: Increased from 17.29% in FY 2022-23 to 21.98% during FY 2023-24.
• Return on Net Worth: Increased from 11.67% in FY 2022-23 to 14.14% in FY 2023-24.
• EBIT/ Capital employed: Increased from 20.25% in FY 2022-23 to 22.97% during 2023-24.
• Earnings Per Share (EPS): Increased from ₹8.41 in FY 2022-23 to ₹11.22 in FY 2023-24.

Business Segment Performance #

• Chemicals Segment: Revenue decreased from ₹5,585.71 crore in FY 2022-23 to ₹5,416.47 crore in FY 2023-24. PBIT increased from ₹383.59 crore to ₹967.24 crore.
• Aluminium Segment: Revenue decreased from ₹10,245.79 crore in FY 2022-23 to ₹9,556.53 crore in FY 2023-24. PBIT decreased from ₹1,778.73 crore to ₹1,526.46 crore.
• Inter-segment Revenue: Increased from ₹1,647.26 crore to ₹1,831.60 crore.

Major Strategic Initiatives and Their Progress #

• 5th Stream Alumina Refinery Expansion: Approximately 65% physical progress completed, with commissioning expected by September 2025.
• Pottangi Bauxite Mines: Mining lease executed on June 13, 2024, for 50 years. Steps for obtaining clearances and operationalization are in progress.
• Crushing and Conveying system from Panchpatmali Mines South Block: Site construction in progress, with project completion by May 2025.
• Utkal-D and E Coal Blocks: Utkal-D operationalized, with 2 million MT of coal supplied in FY 2023-24. Efforts are underway to consolidate clearances and achieve 4 million MT peak rated production.
• Caustic Soda Project (GNAL): Operational, securing a critical raw material. NALCO received caustic soda supply from GNAL starting August 2022.
• High-End Aluminium Alloy Plant (UADNL): Joint Venture with MIDHANI. A market survey report is under examination.
• Overseas Acquisition of Strategic Minerals (KABIL): Exploring lithium and cobalt assets in Argentina, Australia, and Chile. An exploration and development agreement was signed in January 2024 for five lithium mines in Argentina.

Risk Landscape Changes #

• Increased Global Market Volatility: Heightened geopolitical tensions and trade policies (sanctions on Russian metals) create supply chain disruptions and price fluctuations.
• Raw Material Supply: Disruptions due to incidents like the explosion in Guinea and re/finery closures (Alcoa Kwinana) impact bauxite and alumina supply, affecting production costs.
• Carbon Border Adjustment Mechanism (CBAM): Implemented a carbon pricing mechanism.
• Cyber Security: Enhance network gateway and end point security solution.

ESG Initiatives and Metrics #

• Environmental Management: All production units are certified to ISO 14001:2015 and ISO 45001:2018.
• Renewable Energy: Operates 198.40 MW wind power plants, with a 25.5 MW project under development.
• Water Management: Zero discharge implemented in all production units. Rainwater harvesting systems are operational.
• Waste Management: Focus on the 4R principle (Reduce, Reuse, Recycle, and Redesign). Achieved 100.70% ash utilization at the Alumina Re/finery and 100.64% at the Steam Power Plant in FY 2023-24.
• CSR Initiatives: Spent ₹50.53 crore on various CSR projects in FY 2023-24, focusing on healthcare, education, drinking water, rural development, and environmental sustainability.
• Social Accountability 8000: All units are certified to SA 8000:2014, demonstrating a commitment to a decent workplace.

Management Outlook #

• Global Aluminium Demand: Expected to increase by almost 40% by 2030, driven by transportation, construction, packaging, and electrical sectors.
• Domestic Aluminium Demand: Estimated to grow at 9% annually through FY 2023-24 and FY 2024-25, fueled by infrastructure development.
• Adoption of emerging technologies: Blockchain Integration Project.
• Focus on Sustainability: Prioritizing decarbonization and sustainable production, transitioning to renewable energy sources, and implementing carbon capture systems.

Detailed Analysis #

Financial Position: Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (Consolidated) #

(₹ in crore)

Significant Changes in Major Line Items (>10% YoY) #

(₹ in crore)

• Non-current Assets: Increased by ₹778.08 crore (6.31%) in 2023-24, mainly due to additions to Capital Work in Progress of 5th stream brown/field Alumina refinery expansion.
• Non-Current Assets held for Sale: Increased signi/ficantly due to old discarded vehicles & plant & machinery.
• Current Assets: Increased by 829.38 cr (15.6%) in 2023-24. Main increase due to increase in bank balance, other /financial asset.
• Current liabilities: Increased by 292.03 cr. (10.11%) due to increase in creditors for supplies and services.

Working Capital Trends #

(₹ in crore)

• Working capital increased, major contributors being trade receivables, cash and bank balances, and other financial assets in current assets.

Asset Quality Metrics #

Given the nature of the business (mining and manufacturing), direct asset quality metrics like “Non-Performing Assets” are not typically applicable. However, certain aspects can be analyzed:

• Impairment of Assets: There was an impairment of Non-current assets during financial 2023-24 due to non-completion of a project .
• Fixed Asset Turnover: As provided in the report total revenue from operations, 2023-24: 13,149.15, 2022-23: 14,256.85, 2021-22: 13,092.38 and total Property, plant and equipment in the year,2023-24: 7,020.24, 2022-23: 6916.39, 2021-22: 7,001.94. Fixed assets turnover ratio in the year 2023-24 is 1.87, 2022-23: 2.06, 2021-22: 1.87

Debt Structure and Maturity Profile #

• Borrowings: Current borrowings of ₹39.16 crore (FY 2023-24), secured by hypothecation of inventories and trade receivables.
• Lease Liabilities: Non-current: ₹51.00 crore (FY 2023-24) Current: ₹6.22 crore (FY 2023-24)

Off-Balance Sheet Items #

• Contingent Liabilities: ₹1,920.03 crore as of March 31, 2024, decreased from ₹2,362.29 crore as of March 31, 2023. These primarily relate to claims against the company not acknowledged as debts, including demands from statutory authorities and claims by contractors/suppliers.
• Commitments:
  • Capital commitments: ₹2538.84 crore (FY 2023-24)
  • Other commitments (Export obligation): ₹205.17 crore (FY 2023-24)

Revenue Breakdown by Segment and Geography #

Chemical Segment #

• FY 2023-24 Revenue: ₹5,416.47 crore
• FY 2022-23 Revenue: ₹5,585.71 crore

Aluminium Segment #

• FY 2023-24 Revenue: ₹9,556.53 crore
• FY 2022-23 Revenue: ₹10,245.79 crore

Geographical Revenue #

FY 2023-24 #

• Domestic: ₹8,752.88 crore
• Exports: ₹4,275.73 crore

FY 2022-23 #

• Domestic: ₹9,892.07 crore
• Exports: ₹4,216.76 crore

Cost Structure Analysis #

FY 2023-24 #

• Raw materials consumed: 25.27% of total expenses
• Power & Fuel: 32.12% of total expenses
• Employee benefits expenses: 18.42% of total expenses
• Depreciation and amortization: 6.79% of total expenses

FY 2022-23 #

• Raw materials: 25.31% of total revenue
• Power & Fuel: ₹4,693.69 crore
• Employee benefits: ₹1,832.06 crore

Margin Analysis #

Operating Profit Margin #

• FY 2023-24: 21.98%
• FY 2022-23: 17.29%
• Increase: 27.13%

Net Profit Margin #

• FY 2023-24: 15.76%
• FY 2022-23: 10.90%

Non-Recurring Items #

FY 2023-24 #

• Exceptional income: ₹(426.81) crore (reversal of additional royalty)

EPS Analysis (Basic/Diluted) #

• FY 2023-24: ₹11.22
• FY 2022-23: ₹8.41

Quarterly Revenue Trends #

• Q1: ₹3,178.36 crore
• Q2: ₹3,043.42 crore
• Q3: ₹3,346.90 crore
• Q4: ₹3,579.05 crore

Cash Management #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

• Increased significantly in 2023-24 to ₹2,719.32 crore from ₹908.24 crore in 2022-23, reflecting a substantial improvement in operational performance.

Investing Cash Flow (ICF) #

• Shows a large outflow of ₹2,000.47 crore in 2023-24, increased from an outflow of ₹334.25 crore in 2022-23, mostly attributable to high Capex and investments.

Financing Cash Flow (FCF) #

• Consistent outflow, primarily due to dividend payments, at ₹738.65 crore outflow in 2023-24.

Working Capital Management Efficiency #

• Data indicates volatile changes in working capital components. Decreases in inventories and increases in trade payables contributed positively to OCF.
• An increase in trade receivables suggests potential challenges with payment collection.

CAPEX Analysis by Segment #

• Total additions to PPE and intangible assets under development are ₹849.57 crore in 2023-2024

Chemical Segment #

• Additions of ₹162.11 crore in 2023-24.

Aluminium Segment #

• Additions of ₹585.40 crore in 2023-24, indicating a focus on expanding or upgrading this segment.

Unallocated/Common Segment #

• Additions of ₹ 102.06 crore, and the Company has undertaken Projects with capex of ₹8,254.40 crore.

Dividend and Share Buyback Trends #

Dividends #

• Total dividend payout for FY 2023-24 was ₹734.65 crore, representing 35.66% of PAT.

Share Buyback #

• No share buyback activity reported in 2023-24. Previous buybacks occurred in 2018-19 and 2020-21.

Debt Service Coverage #

• The company has no borrowings except the bills discounting facility, therefore, there are no obligations towards loans or borrowings.

Liquidity Position and Cash Conversion Cycle #

Cash and Cash Equivalents #

• Decreased to ₹43.49 crore as of March 31, 2024, from ₹63.29 crore the previous year.

Bank Balances #

• Increased to ₹2,531.66 crore from ₹2,054.21 crore.

Current Ratio #

• Approximately 2:1 for both years, indicating a stable liquidity position.

Financial Analysis of National Aluminium Company Limited (NALCO) #

Profitability Ratios (3-Year Trend) #

• ROE, ROA, and ROCE increased in 2023-24, reversing some of the previous year’s decline.
• Both Operating and Net Profit Margins improved significantly in 2023-24, suggesting improved cost control and operational efficiency.

Liquidity Metrics #

• Current Ratio remained stable, indicating adequate short-term liquidity.

Efficiency Ratios #

• Inventory Turnover Ratio decreased slightly, indicating a modest slowdown in inventory movement.
• Trade Receivables Turnover ratio declined, indicating that collection is slow.
• Total Assets Turnover ratio decreased, indicating drop of efficiency to utilization of total assets.

Segment-wise ROCE #

• Both segments exhibit a high ROCE, with the Aluminium segment having a slightly higher return.

Working Capital Ratios #

Receivables days were calculated by multiplying 365 with trade receivable and dividing it by revenue from contract, inventory days were calculated using 365 multiplication with inventory and dividing it by cost of goods sold.

Comparison with Industry Averages #

Direct comparisons with industry averages are not possible without external data. However, based on the available figures, NALCO’s profitability and returns were high and enhanced during 2023-24. The liquidity position is sound. The decline in turnover ratios may needs to be scrutinized in comparison to industry trends to assess if it’s a company-specific issue or a broader industry trend.

NALCO Business Segment Performance Analysis (FY 2023-24) #

Revenue and Profitability #

• Overall Company Revenue: Decreased by 7.77%

Chemical Segment #

• Revenue: ₹5,416.47 crore, a decrease of 3.03% from ₹5,585.71 crore in FY 2022-23.
• PBIT (Profit Before Interest and Taxes): ₹967.24 crore, a significant increase of 152.15% from the previous financial year.
• PBIT Margin: Increased to 27.40% in 2023-24 from FY 2022-23.

Aluminium Segment #

• Revenue: ₹9,556.53 crore, a decrease of 6.72% from ₹10,245.79 crore in FY 2022-23.
• PBIT: ₹1,526.46 crore, a decrease of 14.19% from the previous financial year.
• PBIT Margin: 16.07% in 2023-24.

Market Share and Production #

• Alumina Refinery Capacity Utilization: 101.15%
• NALCO’s Contribution to India’s Total Alumina Production: 27.19% during FY 2023-24.

Key Product Sales Performance #

Alumina #

• Total Chemical Sale: Decreased from 12,46,637 MT (FY 2022-23) to 11,68,186 MT.
• Export Sales of Alumina: 11,11,474 MT.
• Domestic Sales of Alumina: 56,712 MT.

Aluminium #

• Total Metal Sale: Record high of 4,70,108 MT, registering a growth of 1.30%.
• Export Sales of Aluminium: 51,163 MT.
• Domestic Sales of Aluminium: 4,18,946 MT.

Geographic Distribution #

• National: NALCO operates in 23 states within India.
• International: NALCO exports to 13 countries.
• Export Contribution: Exports contributed 33% to the total turnover for FY 2023-24.

Capital Expenditure and Capital Employed #

• Consolidated CAPEX: ₹1,997.55 crore for FY 2023-24.
• Segment-wise Capital Employed (FY 2023-24):
  • Chemicals: ₹3,004.60 crore (29.07% of total)
  • Aluminium: ₹4,215.45 crore (40.79% of total)
  • Un-allocable: ₹3,114.87 crore (30.14% of total)

Operational Efficiency #

• Capacity Utilization:
  • Alumina Refinery: 101.15%
  • Smelter Plant: Highest ever cast metal production of 4,63,428 MT.
• Bauxite Transportation: Record high of 75,27,016 MT in FY 2023-24.
• Cost Reduction Measures: Unit-specific cost reduction measures were implemented.

Growth Initiatives #

• 5th Stream Alumina Refinery expansion (1 million MT per annum capacity addition).
• Exploration of power sourcing options for a 0.5 million MT Smelter expansion.
• Operationalization of Utkal-D Coal Mines and progress towards opening Pottangi Bauxite Mines and Utkal-E Coal Mines.
• Joint ventures for Caustic Soda production (with GACL), high-end aluminium alloy plant (with MIDHANI), and acquisition of strategic minerals overseas (with HCL and MECL).
• Development of Angul Aluminium Park to promote downstream industries.

Challenges #

• Volatility in global aluminium prices.
• Dependence on traditional energy sources (coal) and associated environmental concerns, including carbon emissions.
• Potential impact of global trade policies, geopolitical tensions, and supply chain disruptions.
• Regulatory pressures related to sustainability and decarbonization (e.g., Carbon Border Adjustment Mechanism - CBAM).
• Competition from cheaper aluminium imports.
• IT implementation that included: ERP Systems, digitalized operational workflows, employee self-service apps, and cloud-based services.

Risk Framework #

Comprehensive Risk Assessment #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing. The global aluminum market is showing signs of improvement, but demand is dependent on high-consuming sectors, which creates volatility.
• Mitigation Strategies: Capacity addition (5th stream brown/field Alumina Refinery expansion), alternate sourcing of bauxite, backward integration (operationalization of Utkal-D Coal block), and exploration of strategic minerals in overseas locations.
• Control Effectiveness: Partially effective.
• Potential Financial Impact: Negative. High dependence on global market conditions and prices may affect the bottom line.

Operational Risks #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Stable, with an aim to improve through process enhancement.
• Mitigation Strategies: Implementation of Integrated Management System (IMS) based on ISO standards, Energy Management System (EnMS), focus on Total Quality Management (TQM), continuous improvement projects (e.g., Kaizen), and digitalization of operations.
• Control Effectiveness: Effective.
• Potential Financial Impact: Negative, The ripple effect of Shanghai to the LME.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Volatile. FY 2023-24 saw a decrease in revenue from operations by 8% compared to FY 2022-23, primarily due to a decrease in the price of Alumina and Aluminum.
• Mitigation Strategies: Risk Management Policy, adherence to government guidelines.
• Control Effectiveness: Partially effective.
• Potential Financial Impact: Negative and Positive. Volatility due to market and operational conditions.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Adherence to Presidential Directives, compliance with applicable laws and regulations, Whistle Blower Policy, Corruption Risk Management Policy, and Fraud Reporting Policy.
• Control Effectiveness: Very effective.
• Potential Financial Impact: Negative. Compliance with new regulations.

Emerging Risks #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Increasing. Decarbonizing and sustainable aluminium production is poised to become the foremost focus on the supply side.
• Mitigation Strategies: Adoption of emerging technologies (e.g., Blockchain Integration Project), investment in R&D for green technologies, and transition to renewable energy sources.
• Control Effectiveness: To be determined, as these are ongoing initiatives.
• Potential Financial Impact: Both negative (initial investment costs) and positive (long-term cost savings and market competitiveness).

Quantitative Risk Metrics and Year-over-Year Changes #

• Revenue from Operations: Decreased by 8% YoY (FY 2023-24 vs. FY 2022-23).
• Other Income (Non-operating): Increased by 7.31% YoY.
• Raw material Cost: Decreased by 11.99%.
• Power and Fuel cost: Decreased by 24.42%.
• Total Expenses: Decreased by 11.91% YoY.
• Profit After Tax: Increased from 1,544.49 crore (FY 2022-23) to 2,059.95 crore (FY 2023-24).
• Earnings Per Share: Increased from 8.41 (FY 2022-23) to 11.22 (FY 2023-24).
• Capital Expenditure (Standalone): 1,957.06 crore (FY 2023-24).
• CSR Expenditure: 50.53 in FY2023-2024, 48.15 mandated.
• EBIT/ Net sales: 18.16% in 2023-24, 13.89% in 2022-23.
• PAT / Net Worth: 14.14%, 11.67% in 2022-23.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• Alumina Segment: Expanding capacity through the 5th stream addition (1 million MT per annum) to the existing Alumina Refinery. About 65% physical progress has been completed, with commissioning expected by September 2025. This will increase refining capacity from 2.1 million MT to 3.1 million MT per annum. Securing bauxite supply for this expansion is a key strategic goal, with sourcing planned from the South Block and, eventually, the Pottangi Bauxite Mines. Pottangi Bauxite Mine was secured on 13.06.24
• Aluminium Segment: Establishing a 0.5 Million TPA brown/field Smelter expansion at Angul. The Detailed Project Report is prepared, and investment approval obtained, Capex around 17000cr. Finalizing power sourcing is a key step. A JV (Utkarsha Aluminium Dhatu Nigam Limited) is aimed at producing high-end aluminium alloys for defense, aerospace, and automobiles, reducing import dependence.
• Raw material Security Caustic Soda plant JV (GNAL) is Backward integration. Utkal-D coal mine is operational, coal is supplied from the captive mine. Planned consolidation of Utkal-D & E to increase peak rated production.
• Diversification: Blockchain Integration Project has been initiated with the aim of integrating blockchain technology

Competitive Advantages and Market Positioning #

• Alumina Segment: NALCO contributed 27.19% of India’s total alumina production in 2023-24 (2.04 Million Tonnes out of 7.52 Million Tonnes). This, along with operationalization of Pottangi mines, makes NALCO well positioned.
• Aluminium Segment: The company is using Aluminium metal. China was the largest producer as well as consumer during the year, contributing 58.82% share (i.e. 41.58 Million Tonnes) of the world production and 61.19% (i.e. 42.88 Million Tonnes) of the world consumption of Aluminium. India’s aluminium demand is expected to double by 2033 providing strong market positioning.

Innovation Initiatives and R&D Effectiveness #

• Cross-Functional Focus: 7 cross-functional Quality Improvement Project teams at the Smelter, using structured approaches and Advanced Statistical Techniques.
• Patents and Collaboration: 44 patents filed, 31 granted, 8 commercialized, and 4 granted in 2023-24. 18 collaborative projects are in progress.
• Specific R&D Achievements:
  • Gallium extraction project with BARC.
  • “Holistic Utilization of Red Mud” project under Niti Aayog.
  • Development of 4N High pure Alumina.
  • Development of Bauxite Certified Reference Material (CRM BARC-B1201).
  • Spent Pot Line Carbon treatment process development (patent granted).
  • Production of grain-refined EC grade Al wire rods.

M&A Strategy and Execution #

• Joint Ventures:
  • GNAL (with GACL): Operational, securing caustic soda supply.
  • Angul Aluminium Park Pvt. Ltd. (with IDCO): Promoting downstream industries, infrastructure development nearly complete.
  • Utkarsha Aluminium Dhatu Nigam Limited (with MIDHANI): Focused on high-end aluminium alloys.
  • Khanij Bidesh India Limited (KABIL) (with HCL and MECL): Focuses on acquiring strategic minerals overseas (Lithium and Cobalt).

Management’s Track Record in Execution #

• Physical Performance Achievements:
  • Panchpatmali Mines: Achieved highest-ever bauxite transportation in 2023-24.
  • Alumina Refinery: Achieved 101.15% capacity utilization in 2023-24.
  • Aluminium Smelter: Achieved highest-ever cast metal production in 2023-24.
  • Utkal-D Coal mine operationalization.
• MoU Performance : Company rated ‘Good’ as per MoU

Capital Allocation Strategy #

• Major Capex: ₹1,957.06 crore (standalone) and ₹1,997.55 crore (consolidated) in 2023-24, showing a strategy of consistent, high investment in growth projects.
• Dividend During the year, the Company has paid /final dividend for the FY 2022-23 @ ₹ 1.00 per equity share amounting to ₹ 183.66 crore and interim dividend @ ₹ 3.00 per equity share amounting to ₹ 550.99 crore in two tranches for the FY 2023-24.
• Focused Investments: Signi/ficant investments in Re/finery and Bauxite Mines capacity addition, Utkal-D and E Coal Blocks, and renewable energy projects (wind power).

Organizational Changes and Their Impact #

• Leadership Changes: Shri Jagdish Arora appointed as Director (P&T) on 11.10.2023 and Additional Charge of Director (HR) wef 14.03.2024. Shri Radhashyam Mahapatro, Director (HR) was placed under suspension.
• Digital Transformation: Implementation of ERP, e-Office, and various digital platforms (customer, vendor, CSR, and retired employee apps) indicates a shift towards greater digitalization and stakeholder engagement. Computerized Hospital Management System implemented at company owned hospitals
• IT Infastructure Implementation of SDWAN Technology and Dual MPLS.
• Vigilance: Whistle Blower Policy, Corruption Risk Management Policy, and Fraud Reporting Policy are implemented.
• CSR Implementation as per mandates of the company Act
• QMS Implementation of (IMS) in all Units.
• HR Recruited at lateral and entry level as well as non-executive employees were recruited.
• Sports Promotion of sports through recruitment of talented sports personal.

ESG Analysis of NALCO #

Environmental Metrics and Targets #

• NALCO achieved 100.70% ash utilization at its Alumina Refinery for 2023-24.
• The Steam Power Plant of Alumina Refinery achieved 100.64% ash utilization against a target of 100%.
• Smelter plant achieved stack emission within the specified norm.
• The Company implemented massive plantation. Around 106.5 lakh plants has been planted.
• All production units operate with valid “Consent to Operate” under Air & Water Act and valid authorization under Hazardous Waste and Biomedical Waste. Zero discharge has been implemented with all waste water treated and recycled. Rain water harvesting system in operation at all production units.

Social Responsibility Programs #

• NALCO spent ₹50.53 crore on CSR projects in FY 2023-24, exceeding the mandated obligation of ₹48.15 crore.
• CSR initiatives focused on healthcare (mobile health units, OPD centers, support to health centers), safe drinking water supply, Swachhata initiatives, education (vernacular medium schools, residential education for underprivileged children), promotion of traditional art and handicraft, and skill development.
• The Company supports the “Indradhanush Scheme,” providing residential education to 1,191 poor and tribal children in Koraput district since 2012.
• Provided door step primary health care and free medicine for 250 periphery villages with Mobile Health Unit Services and OPD center.

Governance Structure and Effectiveness #

• NALCO’s Board of Directors includes Functional Directors, Part-time Official Directors, and Part-time Non-official (Independent) Directors.
• As on 31.03.2024, Non-executive Directors constitute 62.50% of the total Board strength.
• Independent Directors represent 50% of the total Board strength.
• Women Directors, including an Independent Woman Director, constitute 12.50% of the total Board strength.
• The company is following the regulation of providing information related to investors in Customer Mobile App ‘NAGINAA’, Vendor Mobile App ‘NAMASYA’, Citizen Mobile App ‘NISARG’.
• The Board has multiple sub-committees, including Audit, CSR & SD, Nomination and Remuneration, Stakeholders Relationship, Risk Management, Technology committee and Share transfer committee.
• The company has formed a JV company with GACL named ‘GACL-NALCO Alkalies and Chemicals Private Ltd. (GNAL)’.
• The Audit Committee met eight times during FY 2023-24. All members attended at least 3 meetings.
• The Company has a Whistle Blower Policy, Corruption Risk Management Policy, and Fraud Reporting Policy.
• The Company holds the Chairmanship position of TOLIC, Bhubaneswar and Angul.
• The Company uses ISO 9001, ISO 14001, ISO 45001, ISO 50001, SA 8000, ISO 27001, ERP, CPPP, and GeM.
• The equity shares of the Company continued to be listed on BSE Limited and National Stock Exchange of India Ltd.

Sustainability Investments and ROI #

• NALCO has established 198.40 MW Wind Power Plants and is adding another 25.5 MW.
• The company is investing in a 5th stream addition to the Alumina Refinery, expecting a capacity increase from 2.1 million MT to 3.1 million MT per annum.
• NALCO invested in Research and Development projects focused on the “Holistic Utilization of Red Mud”.
• NALCO’s Panchpatmali Bauxite Mines received a number of awards for its Environment Concern, Sustainable development, overall performance during the 25th Mines Environment and Mineral Conservation Week 2023-24, organised by IBM.
• Investment decision for setting up of Pilot Aluminium Alloy Casting plant at NRTC has been obtained.

Regulatory Compliance and Future Preparations #

• NALCO complies with Presidential Directives on SC/ST reservation.
• All units are certified to SA 8000:2014, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, and ISO 50001:2018.
• The Company complies with the Right to Information Act.
• The company has implemented “Blockchain Integration Project”.
• The company is taking multiple initiatives under ‘Swachhata Hi Seva’ campaign.
• The company is taking action to explore extraction of Gallium metal.
• The company addresses complaints as per Marketing guidelines.
• The company is developing Miyawaki garden.
• The company is planning to setup a pilot plant at Alumina Refinery.
• The Company has achieved a CAPEX of 1997.55 crore on a consolidated basis.

Forward Outlook: Future Projections and Guidance #

Management Guidance and Assumptions #

• Overall: Core values include employee participation, mutual respect, and trust. Zero-tolerance for indiscipline.
• Human Resources: Focus on health and safety, talent acquisition, and capability building. Revisiting and amending HR policies.
• Risk management: Intrinsic part of business, guided by GOI guidelines.
• IT: ERP system integrated since 2010.
• Risk Managment Policy: Approved by the board and available on the website.

Market Growth Forecasts #

• Alumina (2024): Global demand: 138.12 million MT, Supply: 137.65 million MT, Deficit: 0.47 million MT.
• Aluminum Metal (2024): Global demand: 71.80 million MT, Supply: 71.99 million MT, Surplus: 0.189 million MT.
• India Aluminum Consumption (2023-24): Increased 11.4% from 4.44 to 4.95 million tonnes.
• India Aluminum Market: Predicted to reach USD 19.76 billion by 2030, CAGR of 7.6% from 2024 to 2030.
• India Aluminum Demand: Estimated to increase 9% annually through 2023-24 and 2024-25.

Planned Strategic Initiatives #

• Capacity Addition (Refining & Mining): 5th stream addition to Alumina Refinery (1 million MT per annum) and operationalization of Pottangi Bauxite Mines.
• Alternate Bauxite Sourcing: Setting up a crushing and conveying system at Panchpatmali Mines South Block.
• Wind Power Project: Adding a 25.5 MW wind power project at Kayathar, Tamil Nadu.
• Utkal-D and E Coal Blocks: Consolidation of statutory clearances to operate both leases as a single mine.
• Blockchain Integration Project: Integration with the organization’s recruitment app.
• R&D: 44 patents filed since inception, 31 granted, 8 commercialized, 4 patent applications granted in 2023-24.

Capital Expenditure Plans #

• Standalone Basis (2023-24): ₹1,957.06 crore.
• Consolidated Basis (2023-24): ₹1,997.55 crore (including capitalization by joint venture companies).
• 5th Stream Alumina Refinery & Pottangi Bauxite Mines: Estimated capital outlay of ₹8,254.40 crore.
• Crushing and Conveying System (Panchpatmali Mines): Estimated capital outlay of ₹483 crore.
• Wind Power Project (25.5 MW): ₹163 crore.
• Pilot Aluminium Alloy Casting plant at NRTC: Investment decision obtained for setting up the plant.

Efficiency Improvement Targets #

Bauxite Mines #

• Reconditioning of poly pulley hubs and idlers.
• Rebuilding of crushing segments.
• Reduction in diesel consumption through fuel additives and optimized operations.

Alumina Refinery #

• Development of Ball Mill Hydro-Cyclone Choke detection system.
• Provision of mill interlock for switching off ESP fields.
• Phasing out old ball cocks with new water level control valves.
• Recirculation of service Rinse Water of Mixed Bed-IV to Degasser Tank.

Smelter Plant #

• Graphitization of cathode blocks.
• Modification of Winch trolley communication control system.
• Installation of Riser dampers.
• Installation of Exhaust Manifolds.
• Replacement of pumps and compressors with more energy efficient units.
• Increased use of cheaper Low Bulk Density AlF3.
• Replacement of light fixtures with LED.

Captive Power Plant #

• Renovation and Modernization of existing Air Preheater.
• Revamping of Cooling Tower.
• De-staging of existing Condensate Extraction Pump.
• Chemical cleaning of condensers.
• Implementation of Variable Voltage Variable Frequency Drive (VVVFD) panel.

Potential Challenges and Opportunities #

Challenges #

• High dependence on global market conditions and prices.
• High outflow of foreign exchange due to import of Aluminum scrap.
• Dependence on traditional energy sources (coal-fired power plants).
• Potential for supply chain disruptions and increased costs due to geopolitical tensions and trade policies.
• Environmental regulations and carbon emission reduction targets (e.g., Carbon Border Adjustment Mechanism - CBAM).
• Closure of Alcoa, Kwinana refinery in Western Australia, and power shortage in Yunnan (China).

Opportunities #

• Growing global demand for aluminum in transportation, construction, packaging, and electrical sectors.
• Transition to green energy sources and increasing demand for aluminum in EVs and renewable energy infrastructure.
• Increased consumption from renewables and the need for conductor cables for power distribution.
• Potential for growth in the construction sector and canned drinks packaging.
• Adoption of emerging technologies like AI and Blockchain.
• India´s GDP growth of 7% (estimated).
• Expansion of production capacities and development of new technologies.

Scenario Analysis and Sensitivity #

The analysis indicates multiple variables, internal and external, that introduce complexity into operations and financial projections. Sensitivity needs to be performed by changing those assumptions.

Scenario 1: Base Case (Moderate Growth) #

• Assumes continued global demand growth, stable raw material prices, and successful implementation of expansion and efficiency projects.
• Sensitivity: Analyze the impact of a 5% and 10% fluctuation in Alumina and Aluminium prices on revenue and profitability.

Scenario 2: Optimistic Case (High Growth) #

• Assumes accelerated global demand, favorable trade policies, and successful adoption of new technologies.
• Sensitivity: Assess the impact of faster-than-expected commissioning of expansion projects on revenue and cash flow.

Scenario 3: Pessimistic Case (Slow Growth/Downturn) #

• Assumes a global economic slowdown, increased trade barriers, and delays in project implementation.
• Sensitivity: Analyze the impact of a 15% drop in aluminum prices and a 20% increase in energy costs. Evaluate the effectiveness of risk mitigation strategies (e.g., hedging, cost reduction).

Key Assumptions Sensitivity #

• LME Price Fluctuation: Varying the LME price (+/- 10%, +/- 20%) and observing the impact on revenue, profitability, and project viability.
• Raw Material Costs (Bauxite, Caustic Soda, Coal): Variations (+/- 5%, +/- 10%) on the cost of goods sold.
• Energy Costs: Variations in coal and fuel oil prices need to be assessed.
• Project Timelines and Costs: Model the effect of delays (e.g., 6 months, 1 year) and cost overruns (e.g., 10%, 20%) in expansion projects.
• Regulatory Changes (CBAM).
• Geopolitic Situations: Factors that can affect supply or increase costs.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditors issued an unmodified opinion on the standalone and consolidated financial statements.
• Emphasis of Matter: Attention was drawn to Note no. 29.3 of Stand alone and Consolidated Financial statement regarding non-recognition of revenue from two wind power plants due to the absence of a fresh Power Purchase Agreement.
• Qualification of Stand alone and consolidated finacial statement.
  • The Company is maintaining proper records showing full particulars including quantitative details and situation of Property, Plant and Equipment including Right of Use Assets.
  • The Company is maintaining proper records showing full particulars of intangible assets.

Key Accounting Policies and Changes #

• Change in Accounting Estimate: A change of depreciation from the date of installation to the acquisition date of spare parts more than the benchmark value, had a material effect on the financials, resulting in an additional depreciation charge of ₹76.52 crore.

Internal Control Effectiveness #

• Payroll Software Weakness: The Payroll software used by the Company did not have an audit trail feature enabled.
• Effective System Confirmed: The internal financial controls over financial reporting of the Company and its audited joint ventures were generally deemed adequate and operating effectively as of March 31, 2024.
• A system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Regulatory Compliance Status #

• General Compliance: The Company complied with the Companies Act, 2013, SEBI (LODR) Regulations, 2015, and DPE guidelines on Corporate Governance, except for the Chairman of the Audit Committee not possessing accounting or related financial management expertise.
• MSE Dues: No delays in payment to MSME suppliers exceeding 45 days were reported.
• SEBI Non-Compliances: There are non compliances regarding SEBI. Penalties by NSE and BSE for non-compliance with SEBI (LODR) Regulations related to the number of Independent Directors were waived during the financial year 2022-23.
• CSR Expenditure: Complied.
• POSH Act compliance: Reported.

Legal Proceedings and Their Potential Impact #

• Contingent Liabilities: The Company disclosed significant contingent liabilities related to disputed tax demands from various statutory authorities, and claims from contractors and suppliers.
• The Company does not recognise any additional royalty and related expenses during the current financial year and amount charged till 31.03.2023 has been reversed recognising ₹ 426.81 crore as the exceptional income during FY 2023-24.

Related Party Transactions #

• Material Transaction: A related party transaction was entered with M/s. GACL-NALCO Alkalies and Chemicals Private Limited (a JV) for procurement of Caustic soda lye at arm’s length.
• Disclosure Compliance: Related party transactions and balances were disclosed in Note 41 of the financial statements, complying with Ind AS 24.

Subsequent Events #

• Shri Radhashyam Mahapatro, Director (HR) was placed under suspension vide Ministry of Mines, Govt. of India Order dated 13.03.2024. Ministry of Mines, Govt. of India vide Order no. A08/07/2023-Vig.-Part(1) dated 30.07.2024 has informed that, the President has revoked the suspension of Shri Radhashyam Mahapatro with immediate effect.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting quality can be considered high because policies are transparently reported.
• The primary risks related to non-compliances of SEBI regulations.